Following are four strategies for assessing and reducing your annual SAP Budget:
1) Your budget could be affected this year by decisions on licensing for Indirect Access
SAP is currently offering a program called Document Access Adoption Program (DAAP) that gives incentives to customers to switch from user-based licenses to document-based licenses for indirect access (defined by SAP as licensable “use which occurs by way of a non-SAP front-end or non-SAP intermediary software. For more information on indirect use, read our blog: Indirect Access and SAP’s DAAP Program - Key Questions).
The most commonly advertised option for conversion to DAAP includes a 90% discount with the ability to use the value of unused licenses toward DAAP costs. To determine whether you would benefit from converting to document-based licensing from user-based licensing for indirect users, you need to do the following. First, gain a clear understanding of what is covered by your current indirect user licensing. Then determine if there is a licensing compliance gap based on actual indirect usage. You’ll need to assess both to arrive at a cost estimate for what is truly required. Finally, you will need to compare your current or projected cost of required user-based licensing with projected costs for conversion to and usage with DAAP.
Two key points should be emphasized related to possible impacts to your budget this year. First, SAP has shared they will discontinue the 90% discount via DAAP on December 31, 2021 (it has already been extended one year), so if you want to consider the financial consequences of converting this year vs. converting in the future, now is the time to undertake an assessment.
Second, SAP is offering forgiveness for non-compliance through DAAP. If the findings of an SAP audit were to state you are out of compliance with your indirect user licenses, this could result in audit demands for a large financial settlement based on full pricing with back usage penalties. Taking advantage of DAAP discounts and incentives during 2021 could result in significant net savings. In addition, you are likely to maximize savings and get a better deal if you approach SAP proactively as opposed to being pressured to convert to mitigate costs as part of a compliance review settlement.
Clarify can help you assess your current indirect user access risk, simulate and quantify your financial exposure based on industry specific discounts, and illustrate the impacts and ramifications of moving to DAAP this year.
2) Optimize and right-size your user classifications
User licensing is one of the biggest expenses in your SAP contract. Correctly classifying your user licenses can unlock a lot of money. We very often see Professional licenses--the most expensive user type-- assigned to those who could be assigned a less expensive Employee user license. Full Professional licenses are often purchased when 3-4 other levels could have been sufficient.
As part of this strategy, you would also identify and clean-up licensing related to inactive users and those who are not using SAP. Most clients think they have this covered; but, when we try to confirm that, we find, on average, that 20-30% of users no longer require their SAP licenses. The savings realized can be substantial.
3) Identify shelfware software and terminate licenses and support
Over time, there are changes to corporate strategy and IT landscape, including the replacement of some SAP systems with other systems or new tools. When this happens, clients often neglect to terminate maintenance from SAP for the associated licenses. They may also still have shelfware with the ability to terminate or exchange licenses (if permitted by their contract).
The challenge to implementing this strategy is that names of SAP applications change or different products may be merged into suites over time, and a third party is often needed to identify which licenses and maintenance apply to old products, licensing models, and systems no longer being used. When this challenge exists across multiple business units, a third party can be useful in efficiently aggregating the data and making recommendations for reducing maintenance costs.
4) Leverage conversion from SAP ERP Central Component (ECC) to S/4HANA to negotiate deep discounts and favorable contract terms
SAP, like other software companies, is focused on cloud sales. Much has been written about ECC conversion to S/4HANA which offers both on-premise and cloud editions. Clarify can do an on-premise baseline and simulation that will map your licensing to S/4HANA to determine if this is a beneficial option. If it is, you can use this conversion now as an opportunity to negotiate for exactly what you need, with the potential for deep discounts and favorable contract terms.
We see clients decrease their SAP spend by 22%, on average, by using the above strategies.
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